Why is it in the news?
- The World Bank cautioned that South Asia, including India, is failing to capitalize on its demographic dividend due to sluggish job creation compared to the expanding working-age population.
- Despite this warning, the World Bank projected a robust growth of 0-6.1% for the region in 2024-25, as per its South Asia regional update, “Jobs for Resilience.”
| · This demographic dividend refers to the economic growth potential that can result from shifts in a population’s age structure, with a larger working-age population relative to dependents.
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Some of the key findings
Employment Growth Trends:
- Despite a significant increase in the working-age population, job creation in South Asia has not kept pace. Specifically, India’s employment growth has been sluggish, falling short of the average growth in its working-age population between 2000 and 2023.
- The employment ratio in India declined notably during this period, with the decline being second only to Nepal up until 2022. However, there’s some preliminary data suggesting a rebound in 2023, albeit partially reversing the decline.
Economic Growth and Contribution:
- Despite the employment challenges, India’s economy is expected to maintain robust growth, forecasted at 7.5% in FY23/24.
- This economic expansion, coupled with recoveries in Sri Lanka and Pakistan, has been a significant driver of the strong growth numbers for the South Asian region.
Potential Output Growth:
- The World Bank’s analysis suggests that the region could achieve a 16% higher output growth if the share of its working-age population employed was comparable to other Emerging Market and Developing Economies (EMDEs).
- This highlights the missed opportunity in fully capitalizing on the demographic dividend.
Recommendations to Encourage Employment Growth
- Support the participation of women in the economy by addressing barriers to entry and providing opportunities for skill development and entrepreneurship.
- Increase access to finance for businesses, particularly small and medium enterprises (SMEs), to stimulate investment and job creation.
- Enhance openness to trade to promote economic growth and diversification, facilitating the expansion of businesses and the creation of employment opportunities.
- Ease financial sector regulations to encourage investment and entrepreneurship, fostering a more conducive environment for business growth and job creation.
- Improve the quality of education to ensure that the workforce is equipped with the necessary skills and knowledge to meet the demands of the labour market and drive productivity growth.
